Connecting Two Continents: Opportunities for the EU's Africa strategy

EU-Africa Business Forum: Speech by Mr. Aapo Pölhö, Director General, Department for Africa and the Middle East, Ministry for Foreign Affairs, Finland; Precidency of European Union at the closing ceremony, 17 November 2006

The mutual interest of the European Union and Africa is in trade and investment. That fact presents a unique opportunity for increasing growth through trade and fostering the integration of the continents into the global economy.

This first EU-Africa Business Forum is a very important form of cooperation to find ways how to enhance trade and investments between companies in the two continents.  We thank the private sector for their remarks during the two days and like to present some views about the deliberations of this productive Forum. 

The importance of trade for development and growth has become more and more evident. It is clear that increasing trade and investments will increase the well-being in societies.  There is a challenge to step up the capacity of integrated business environment in Africa. That means infrastructure, market institutions, business competition and good governance. Together, these factors determine the cost level of doing business between African and European companies. 

From the perspective of broad-based development as well as business, it is of utmost importance to involve African countries so that they are genuinely able to participate in and benefit from the international commerce. We should support African countries in strengthening their overall trade capacity both in their North-South and South-South commerce.    

I would like to emphasize the importance of coherence in the EU policies. We have the new EU strategy for Africa. With this new Strategy, the EU affirmed its commitment to peace, stability and development and defined a single comprehensive, integrated and long-term framework for its relations with the whole of Africa. The Strategy is a solid platform to improve the coordination, coherence and consistency between the EU's policies and instruments supporting Africa and those of its Members States. The global market with its new challenges to all of us links the African and European continents together. Therefore, the EU should support African economies to integrate at the global level and to exploit economic relations better than before. One of the biggest challenges is in getting private sector companies to join our shared efforts to develop essential structures for increasing commercial relations between the two continents. I also want to emphasise African ownership when building business environments; competitiveness of market structures and quality of market institutions. In this respect, the local market development is very important.   

The challenges business environments face are not always just creating opportunities but they are also security risks that may cause unexpected harm to business. There is a strong link between development and security. Sustainable development is not possible without stability and security. One central goal of the EU Strategy for Africa is therefore to step up the EU’s efforts at all stages of the conflict cycle: conflict prevention, crisis management, post-conflict situation, reconstruction. Another goal is to support the emerging new security structures with the African Union (AU).

Aid for Trade is needed in all developing countries. Economic Partnership Agreements are currently being negotiated with the African, Caribbean and Pacific (ACP) countries to turn existing trade preferences into a series of reciprocal free trade agreements. Fostering regional integration and a development friendly outcome are at the heart of the EPA negotiations. EPAs provide a basis for an active private sector for Africa's future. We feel that EPAs are not only in EU's interest but first and foremost in African countries' and businesses' interest. In order to work properly they have to be mutually beneficial.

The importance of the EPA negotiations is further underlined after the temporary suspension of the WTO-negotiations. The EU is committed to provide support to Aid for Trade. A collective EU target per year is two billion euros by 2010.  Furthermore, the EU has also made a commitment to allocate a substantial share of the Member states' Aid for Trade contribution for the ACP countries. The on-going scaling-up of EU aid provides new opportunities to strengthen our support also in this field as prioritized by our partners.

Making EPAs development friendly is, however, not just about providing more support. Development funding is no substitute to the potential of economic growth that would result from increased trade and investment. The development agenda needs to be incorporated in the agreements themselves. The EU is committed to an ambitious and timely outcome of the EPA negotiations.

The EPA's have a potential to serve as a platform to promote predictability and security for trading and investment, of facilitating a conducive environment for business. Investment, procurement and competition legislation are but examples of issues that can be promoted not only at the national but also at a regional level. Clear and common rules for wider markets would bring the economies of scale to the support of development.

In addition to EU's Aid for Trade commitments, it is also important to bear in mind that already considerable level of EU support is channelled to productive sectors and infrastructure. Development of trade facilitation infrastructure, such as improvement of ports, roads, railways, and telecommunication networks, will advance Africa’s integration into the global economy as well as regional integration in Africa.

As a part of implementing EU Strategy for Africa, I would like to affirm our commitment to the EU-Africa Partnership on Infrastructure. The Partnership responds to the development goals of the AU and NEPAD. It aims to increase the EU's support and investment in Africa's infrastructure. The Partnership establishes a new EU-Africa infrastructure trust fund, financed jointly by the Community funding, the European Investment Bank, and the EU Member States. In the infrastructure sector, as in others, ownership and partnership remain the key operating principles.

The EU will support Africa’s efforts to identify and address missing links in existing networks, harmonise transport policies, develop integrated water management, develop cross-border and regional energy infrastructure, and promote efforts to bridge the digital divide.  Access to information and application of knowledge and innovation have become decisive factors in when it comes to competitiveness, growth, and wealth. In response to these challenges, governments are adjusting their development strategies within a new framework in which knowledge-related policies in the areas of education, innovation and information and communications technology (ICT) are occupying a central place. Information and communications technology is an important instrument for increasing productivity, competitiveness, creation of public services and sustainable development. 

How can we improve predictability and cost-effectiveness of companies' business environments?  African countries need to improve their governance systems to be able to use the funds efficiently, in a transparent and fair manner, and to build credible institutions. The EU Strategy for Africa identifies good and effective governance as a prerequisite for development and launches a Governance Initiative. The initiative sees good governance in a wide manner requiring comprehensive action from fighting corruption into improving public management systems. The principles of the initiative guide the ongoing EDF programming but are also followed outside the ACP region.

Democratic governance relates both to the political, economic, social and environmental spheres. It is a broad approach to governance. It is based on commonly agreed principles that apply to the main functions of government and to the interaction between public institutions and citizens. Processes of democratic governance cannot be imposed from the outside. In relations between partner countries and donors, it is vital that ownership of the reform processes is respected. Only the countries concerned can decide and implement their own reforms. They themselves have to regognise the benefits of doing so as well as the consequences of not doing so. If there is no political will inside the country, outside support is unlikely to deliver results. Dialogue must be the preferred means of encouraging countries to embark on reforms and it must have a substantial preventive dimension and permit the discussion of politically sensitive issues. Since reform processes can be slow and complex, the dialogue on good governance must be based on realistic expectations and involve a commitment to support the countries' efforts politically as well as financially.

Good governance is an immovable part of good business environment. Africa is displaying clear signs of positive change in the area of democratic governance. Some African countries have committed themselvesto being regularly monitored in the framework of the Africa Peer Review Mechanism, that is a unique tool for peer review and peer learning, which is pursued in the context of NEPAD and the AU.

Economic partnership agreements, infrastructure and good governance have an important impact on commercial relations both in public and private sectors. Our aim is to move towards greater volume and more diversified commercial goods, shifting away from excessive reliance on a few basic commodities. This would give African economies a possibility to participate in global economic production networks and structures.

Once again, this first EU-Africa Business Forum opens up the possibility for regular interaction and helps to find ways to expand trade and investment between the companies of the two continents.  In the future, our challenge is to ensure private sector ownership of the undertaking to combine development, trade and investments. I am convinced that when companies are innovating new business between Europe and Africa, new challenges for public sector will emerge. The dialogue between Europe and Africa has been active this far in the Forum, but most active it should be between private sector partners when they meet and create new business together in everyday life. This kind of a dialogue is institutionalised between other continents; Europe, Asia and Latin America. Now, it is time to anchor Africa to global economy.